Overview of the Debt Limit
■ Limits federal borrowing
■ Around in some form since 1917
■ Modified 14 times since 2001
■ Raising the debt limit enables the government to pay the bills
it has already incurred; it does not, by itself, change future tax
or spending policies
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Composition of Debt Limit
■ Outstanding debt subject to limit on October 8:
– $13.0 trillion in debt held by the public
– $5.1 trillion in debt held by government accounts
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Debt Held by the Public
■ Consists mainly of securities issued by Treasury to raise cash to
fund government activities
■ Measures the cumulative net amount the federal government
has borrowed over time
■ Two types of securities:
– Marketable
– Non-marketable
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Schedule of Cash Flows and Debt Issuance
■ The amount of debt accumulated depends on the size of the
deficit and internal government transactions throughout the
year
– Federal cash flows
– Debt issuance
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If the Debt Limit is Not Raised and the Extraordinary
Measures Are Exhausted
■ Treasury not authorized to issue additional debt beyond the
amount of debt outstanding
■ Delay in payments for government activities
■ Possible default on debt obligations
■ Administration determines which obligations are paid
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